Amazon’s Customer Relationship is King: Will Yours Be a Prince or a Jester?

James L. McQuivey
James L. McQuivey
Vice President, Principal Analyst
October 13, 2016

In 2010, I wrote:

"There's a critical lesson to learn from the most recent changes in the media industry. … while most have been distracted by the form, price, and user experience of their new digital products, a few companies have quietly overhauled the media business by focusing on something else entirely; instead of digitizing the product, these companies have digitized the customer relationship, creating a relationship that can survive the transition from traditional analog media to digital."

I was talking about Netflix, which in 2010 doubled its stock price from under $10 a share to over $20. It now hovers around $100. Back in 2010, I made it clear that this transition to relationships wasn't just about media companies, which were simply canaries in a digital coal mine:

"Experience is the basis for competition; Relationship is the basis for success. Our focus so far has been on media companies because they can apply these lessons directly to their businesses today. However, all strategists will eventually need to follow this strategy — building a digital customer relationship that rewards frequent digital interaction and learns from customer preferences across multiple platforms or contexts."

(See the Forrester Report "Build A Digital Relationship With Your Customer")

Everything I said then not only stands, it has become manifestly easier to prove. In my Forrester Report, "Amazon Makes Digital Relationships Pay, And So Should You," published just this week to Forrester Clients, I give examples that 6 years ago would have seemed whimsical fantasy:

  • Whirlpool's Cabrio washing machine is a lifestyle partner in customer homes. The machine's app includes specific cycle options for things like swimwear or sleeping bags that can't possibly be configured into a usable on-device menu. Using internal sensors, the washing machine can automatically request laundry detergent using Amazon's Dash Replenishment services. Plus, it connects to a Nest Thermostat's sensors to schedule the wash cycle for maximum energy savings. All of this from a company that until recently didn't even know its customers' names, much less their product use patterns.

  • Kabbage ties into small business owners' systems to loan them money. When thousands of small businesses were expanding thanks to eBay and Amazon, Kabbage saw an opportunity to build a new kind of small business lending relationship. Instead of a traditional application process based on static knowledge, Kabbage began giving business owners the option to connect their UPS shipping, QuickBooks accounting, and Stripe payments accounts to Kabbage. By keeping tabs on a company's shipments or sales in real time, the lender can assess borrower risk and adjust credit limits fluidly. That way, small businesses embrace a digital relationship that gives them access to capital in support of their business lifestyle ambitions. 

The relationship is the thing. Every company will want one. And given the rush of competing offers to enter into a relationship with you, the customer, only the "fit" companies will survive. Specifically, those firms that can provide a lifestyle-enabling experience that "fits" into the goals, aspirations, habits, and needs of the customer. In the end, some companies will create kingly relationships, such as the one I write about in the report where I have fascinating data about Amazon's deep relationships with its customers. Some will have princely relationships, which play second-fiddle to an Amazon but are still quite royal, while others will be the court jesters, constantly vying for attention but ultimately failing to establish a memorable presence in people's lives. To pull this off, companies will need a much more complicated mix of relationship tools — the practice of marketing and even the very term marketing is insufficient to this task, as I recently explained when keynoting at NASSCOM's annual MarTech 2016 conference in Mumbai. 

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